American Flatbread is closing

I was talking with a colleague this morning about that reference, asking the exact same question. Only speculations we could come up with were 1) the perception of a lower value home (or upside down in some cases) decreases the feeling of security and curbs spending behavior and 2) owners who were riding the boom using home equity as a credit card and feeling that the good times would never end wound up learning a harsh lesson and are paying for it now. Just our thoughts though...

Which market? The housing market or what? because every 'factor' you listed that retailers see 'now' is pretty much what it always was. No daytime foot traffic, almost zero office/commerical space near by to bring in lunch, and how exactly does lower home values impact disposable income?

It sounds like a bunch of finger pointing at the downturn - when most of the weakness is in the fundamentals that have little to do with the downturn. Which is why so many businesses failed even before the bubble popped. Ashburn landlords want to get a premium that probably is not justified for what the retail fundamentals are here. A few thousand homes doesn't help you all that much when they need to get into the car to get to you, and by doing so can just as readily reach all your competition once in the car. And it didn't take a fortune teller to know what shopping centers were already on the map to be built.

The # of shopping centers is pretty well known. They are planned out ages ago (like the VM center was too). Maybe businesses and landlords need to adapt their practices vs holding onto what you 'thought' the market would be with that 'luck' you mentioned.

Instead of relying on models that require 'luck' to succeed - maybe someone should restructure their business model to not be so volatile and rely so much on luck.

Click to expand...

Couldn't it be that landlords are themselves underwater on their properties and need to charge exorbitant rents just to cover their mortgages?

I don't know for sure, and I'm purely speculating, but I can just imagine that developers built these shopping centers and sold them to businesses for a gazillion dollars under the claims that Ashburn is a goldmine for retail space and they'll never have to worry about the investment.

To me, it seems like it trickle down effect of high costs. I really have no idea who's at the top though; is it developers? Is it landlords?

Couldn't it be that landlords are themselves underwater on their properties and need to charge exorbitant rents just to cover their mortgages?

I don't know for sure, and I'm purely speculating, but I can just imagine that developers built these shopping centers and sold them to businesses for a gazillion dollars under the claims that Ashburn is a goldmine for retail space and they'll never have to worry about the investment.

To me, it seems like it trickle down effect of high costs. I really have no idea who's at the top though; is it developers? Is it landlords?

Click to expand...

Its possible but I doubt it because no matter what, their mortgage payments, if they got fixed rate, would be the same every month until its paid off. But if its variable, Im guessing that for new tenants, they would pass along the costs to them,. Im not sure and whats more, landlords probably aren't going to reveal whether they are underwater or not. I highly doubt that they will tell anyone what their mortgage payments are each month for the entire shopping center development. Whether they are breaking even, making a profit, or losing money is probably what we'll never know!

Couldn't it be that landlords are themselves underwater on their properties and need to charge exorbitant rents just to cover their mortgages?

I don't know for sure, and I'm purely speculating, but I can just imagine that developers built these shopping centers and sold them to businesses for a gazillion dollars under the claims that Ashburn is a goldmine for retail space and they'll never have to worry about the investment.

To me, it seems like it trickle down effect of high costs. I really have no idea who's at the top though; is it developers? Is it landlords?

Click to expand...

But in this example.. the developer and the landlord are the same company At least same parent company. VM developed southernwalk, the shopping center is developed by VM's commercial arm.

So if their costs are too high, they can only point at themselves. If you built something assuming revenue models that were not realistic - they also need to look in the mirror.